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| 8-K - FORM 8-K - ENTROPIC COMMUNICATIONS INC | d8k.htm |
Exhibit 99.1
ENTROPIC COMMUNICATIONS REPORTS SECOND QUARTER RESULTS
Conference Call to be Webcast Today at 1:30 p.m. Pacific Time
SAN DIEGO, August 3, 2011 — Entropic Communications, Inc. (Nasdaq: ENTR), a leading provider of silicon and software solutions to enable connected home entertainment, today reported its second quarter results for the period ended June 30, 2011. Entropic reported second quarter net revenues of $61.5 million, a decrease of 14 percent compared with $71.5 million in the first quarter of 2011 and an increase of 51 percent compared to $40.7 million in the second quarter of 2010.
In accordance with U.S. generally accepted accounting principles (GAAP), the Company’s second quarter net income was $7.8 million, or $0.09 per share (diluted). This compares with GAAP net income of $11.9 million, or $0.13 per share (diluted) in the first quarter of 2011.
Non-GAAP net income in the second quarter was $15.1 million, or $0.17 per share (diluted), compared to non-GAAP net income of $19.6 million, or $0.22 per share (diluted) in the first quarter of 2011.
“Our second quarter results came in below our expectations as we were impacted by lower demand associated with a change in inventory management by one of our large end customers,” said Patrick Henry, president and CEO of Entropic Communications. “From a long-term outlook, we are operating from a position of strength, as we believe our core connected home entertainment technology—MoCA 2.0—will be a key enabling technology for many U.S. and International pay-TV service provider networks. As the MoCA market moves from early adopters to mass market, we are seeing increased interest and demand by OEMs to deliver IP-based video solutions that will enable service providers to distribute the highest quality video and advanced Web services into and throughout the home, based our MoCA compliant solutions.”
| Three Months ended | ||||||||||||
| (In millions, except per share data) |
June 30, 2011 | Mar. 31, 2011 | June 30, 2010 | |||||||||
| Net revenues |
$ | 61.5 | $ | 71.5 | $ | 40.7 | ||||||
| GAAP net income |
$ | 7.8 | $ | 11.9 | $ | 3.1 | ||||||
| GAAP net income per share (basic) |
$ | 0.09 | $ | 0.14 | $ | 0.04 | ||||||
| GAAP net income per share (diluted) |
$ | 0.09 | $ | 0.13 | $ | 0.04 | ||||||
| Non-GAAP net income1 |
$ | 15.1 | $ | 19.6 | $ | 6.1 | ||||||
| Non-GAAP net income per share1 (diluted) |
$ | 0.17 | $ | 0.22 | $ | 0.08 | ||||||
| 1. | Please refer to “Non-GAAP Financial Measures” below and the financial statements portion of this press release for an explanation of the non-GAAP financial measures contained in the table above and a reconciliation of such measures to the comparable GAAP financial measures. |
-more-
| ENTROPIC COMMUNICATIONS REPORTS SECOND QUARTER 2011 RESULTS | PAGE 2 |
Recent Highlights
| • | Announced and demonstrated at The Cable Show, TiVo’s launch of their first MoCA (Multimedia over Coax) certified devices—TiVo Premiere Q and TiVo Preview—powered by Entropic’s silicon, to deliver multi-room digital video recording (DVR), over-the-top (OTT) video and broadcast from a single set-top box. Operators who embrace TiVo’s new products will now be able to realize expanded whole-home capabilities and the same user experience on every TV in the home. Charter, RCN and Suddenlink are the first cable operators to embrace the new Tivo platforms. TiVo plans to make both new products available to its cable operator partners later this year. |
| • | Achieved a major chipset milestone, announcing more than fifty million Entropic MoCA 1.0/1.1 chipsets have been delivered into the market since 2007. Entropic continues to focus on advancing its MoCA solutions to give consumers the best experience for video, voice, and Internet services, as well as ultimate control over how, when and where they enjoy their home entertainment. |
| • | Partnered with Zenverge to develop a transcoding appliance reference design that will enable service providers to optimize DVR storage properties and transcode broadcast content in real-time, thereby allowing consumers to easily view or transfer content from one consumer electronics (CE) device to another, over a MoCA or wireless home network. |
| • | Expanded our strategic collaboration with Intel to develop a new class of industry first, advanced video gateway and client set-top box reference designs, based on the Intel® AtomTM processor CE4200 and powered by Entropic’s MoCA 2.0 solution to enhance the delivery of broadcast and broadband content to the TV. |
| • | Partnered with Zoran on an IP gateway reference design which leverages Entropic’s complete MoCA 2.0 silicon and software solution to enable a new generation of client products with enhanced flexibility, high speed performance and backward interoperability to existing MoCA 1.1 networks—all at the lowest possible system cost. |
| • | Collaborated with Actiontec to develop a Wi-Fi Extender, powered by Entropic’s silicon. This new product is designed to deliver more bandwidth, improved reliability and the best possible wired and Wi-Fi performance and quality-of-service assurance to confidently stream and access high-definition videos and multimedia content anywhere in the home. |
| • | Announced availability of Channel Master’s single and 4-port Internet-to-TV adapters, powered by Entropic’s silicon. With these devices, consumers can connect the Internet to their TV, and networked devices such as Blu-ray players and game consoles with OTT services over a fast reliable wired network connection. |
| ENTROPIC COMMUNICATIONS REPORTS SECOND QUARTER 2011 RESULTS | PAGE 3 |
For More Information
Entropic management will be holding a conference call today, August 3, 2011, at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time to discuss the Company’s results for the second quarter of fiscal 2011 and to provide guidance for the third quarter. You may access the conference call via any of the following:
| Teleconference: | 631-813-4729 | |
| Conference ID: | 82361917 | |
| Web Broadcast: | http://ir.entropic.com/events.cfm | |
| Replay: | 404-537-3406 | |
About Entropic Communications
Entropic Communications, Inc. (Nasdaq:ENTR) is a leading fabless semiconductor company that is engineering the future of connected home networking and entertainment by providing next-generation silicon and software technologies to the world’s leading cable, telecommunications and satellite service providers, OEMs and consumer electronic manufacturers. As a co-founder of MoCA (Multimedia over Coax Alliance), Entropic pioneered and continues to evolve the way high-definition television-quality video and other multimedia and digital content such as movies, music, games and photos are brought into and delivered throughout the home. For more information, visit Entropic at www.entropic.com.
Non-GAAP Financial Measures
This press release and the accompanying tables contain the following non-GAAP financial measures: net income and net income per share. These non-GAAP financial measures exclude the effects on the Statement of Operations of, among others, all forms of stock-based compensation, non-cash acquired intangibles amortization, and the cash tax difference and their related effects on the number of diluted shares used in calculating non-GAAP income per share.
Management uses these non-GAAP financial measures to manage the Company’s business, including setting operating budgets and executive compensation plans. These non-GAAP measures are also used to (i) supplement the financial results and forecasts reported to the Company’s board of directors, (ii) evaluate the Company’s operating performance, (iii) compare the Company’s performance to internal forecasts, and (iv) manage the Company’s business and benchmarking performance internally. The non-GAAP measures have been made available to stockholders consistently in the past to provide transparency on how management manages the Company’s operating performance. Management believes that these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP measures, in evaluating the Company’s ongoing operational performance.
The non-GAAP financial measures disclosed by the Company should not be considered in isolation or a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
| ENTROPIC COMMUNICATIONS REPORTS SECOND QUARTER 2011 RESULTS | PAGE 4 |
Forward-Looking Statements
Statements in this press release that are not strictly historical in nature constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding our expectations for Entropic’s market penetration and overall market expansion, continued and/or future revenue, earnings and product sales growth and the factors that may contribute to such growth. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Entropic’s actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, our dependence on a limited number of customers and service providers for a substantial portion of our revenues; risks that the market for high-definition and standard-definition video and other multi-media content delivery and networking solutions in the United States, China and elsewhere will not develop as we expect; risks associated with competing against larger and more established companies and our ability to compete successfully in the market for MoCA-compliant chipsets; risks associated with timely development and introduction of new or enhanced products; the risk that management’s financial estimates, including estimates used in the calculation of the effective cash tax rate upon which we base our non-GAAP earnings, will be different than expected; risks that our collaborations and partnerships will not yield their anticipated benefits; risks associated with adverse U.S. and international economic conditions; and other factors discussed in the “Risk Factors” section of Entropic’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. All forward-looking statements are qualified in their entirety by this cautionary statement. Entropic is providing this information as of the date of this release and does not undertake any obligation to update any forward-looking statements contained in this release as a result of new information, future events or otherwise.
Entropic Communications® and the stylized Entropic “curve” logo are either trademarks or registered trademarks of Entropic Communications, Inc. in the United States and/or other countries.
Investor Contact:
Debra Hart
Director, Investor Relations
858.768.3852
debra.hart@entropic.com
Media/Industry Analyst Contact:
Ruder Finn for Entropic Communications
Chris Fallon
212.715.1691
fallonc@ruderfinn.com
# # #
ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Statements of Operations
(In thousands, except for per share information)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, 2011 |
March 31, 2011 |
June 30, 2010 |
June 30, 2011 |
June 30, 2010 |
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| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
| Net revenues |
$ | 61,473 | $ | 71,521 | $ | 40,680 | $ | 132,994 | $ | 78,131 | ||||||||||
| Cost of net revenues |
27,646 | 31,939 | 18,831 | 59,585 | 36,532 | |||||||||||||||
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| Gross profit |
33,827 | 39,582 | 21,849 | 73,409 | 41,599 | |||||||||||||||
| Operating expenses: |
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| Research and development |
14,148 | 13,149 | 11,746 | 27,297 | 23,284 | |||||||||||||||
| Sales and marketing |
4,303 | 4,820 | 3,991 | 9,123 | 7,769 | |||||||||||||||
| General and administrative |
3,515 | 3,689 | 3,012 | 7,204 | 5,712 | |||||||||||||||
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| Total operating expenses |
21,966 | 21,658 | 18,749 | 43,624 | 36,765 | |||||||||||||||
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| Income from operations |
11,861 | 17,924 | 3,100 | 29,785 | 4,834 | |||||||||||||||
| Other income, net |
213 | 189 | 20 | 402 | 45 | |||||||||||||||
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| Income before income taxes |
12,074 | 18,113 | 3,120 | 30,187 | 4,879 | |||||||||||||||
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| Income tax provision |
4,318 | 6,258 | 28 | 10,576 | 29 | |||||||||||||||
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| Net income |
$ | 7,756 | $ | 11,855 | $ | 3,092 | $ | 19,611 | $ | 4,850 | ||||||||||
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| Net income per share - basic |
$ | 0.09 | $ | 0.14 | $ | 0.04 | $ | 0.23 | $ | 0.07 | ||||||||||
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| Net income per share - diluted |
$ | 0.09 | $ | 0.13 | $ | 0.04 | $ | 0.22 | $ | 0.06 | ||||||||||
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| Weighted average number of shares used to compute net income per share - basic |
86,046 | 85,408 | 71,972 | 85,712 | 71,621 | |||||||||||||||
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| Weighted average number of shares used to compute net income per share - diluted |
89,290 | 89,321 | 75,616 | 89,296 | 74,777 | |||||||||||||||
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ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Balance Sheets
(In thousands)
| June 30, 2011 |
March 31, 2011 |
December 31, 2010 |
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| (unaudited) | (unaudited) | |||||||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 33,728 | $ | 35,405 | $ | 98,100 | ||||||
| Marketable securities |
102,986 | 106,991 | 48,275 | |||||||||
| Accounts receivable |
35,942 | 23,706 | 18,244 | |||||||||
| Inventory |
33,880 | 35,363 | 39,915 | |||||||||
| Deferred tax assets, current |
5,463 | 9,070 | 14,307 | |||||||||
| Prepaid expenses and other current assets |
6,404 | 5,906 | 6,226 | |||||||||
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| Total current assets |
218,403 | 216,441 | 225,067 | |||||||||
| Property and equipment, net |
11,802 | 11,626 | 11,354 | |||||||||
| Long-term marketable securities |
51,331 | 36,734 | 22,386 | |||||||||
| Deferred tax assets, long-term |
17,304 | 17,304 | 17,304 | |||||||||
| Other long-term assets |
2,481 | 2,963 | 2,697 | |||||||||
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| Total assets |
$ | 301,321 | $ | 285,068 | $ | 278,808 | ||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 13,632 | $ | 9,853 | $ | 18,278 | ||||||
| Accrued expenses and other current liabilities |
3,962 | 4,550 | 3,634 | |||||||||
| Accrued payroll and benefits |
4,565 | 4,994 | 6,666 | |||||||||
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| Total current liabilities |
22,159 | 19,397 | 28,578 | |||||||||
| Deferred rent |
1,336 | 1,455 | 1,568 | |||||||||
| Other long-term liabilities |
71 | 20 | 72 | |||||||||
| Stockholders’ equity |
277,755 | 264,196 | 248,590 | |||||||||
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| Total liabilities and stockholders’ equity |
$ | 301,321 | $ | 285,068 | $ | 278,808 | ||||||
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ENTROPIC COMMUNICATIONS, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except for per share information)
This press release contains the following non-GAAP financial measures: net income and net income per share. The presentation of such measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Our non-GAAP net income and net income per share exclude the items listed below.
The following table sets forth such non-GAAP measures for the applicable periods as well as the reconciliation of such measures to the directly comparable GAAP measures for the periods shown.
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, 2011 | March 31, 2011 | June 30, 2010 | June 30, 2011 | June 30, 2010 | ||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
| GAAP net income |
$ | 7,756 | $ | 11,855 | $ | 3,092 | $ | 19,611 | $ | 4,850 | ||||||||||
| Non-GAAP adjustments: |
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| Stock-based compensation: |
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| Cost of net revenues |
118 | 129 | 89 | 247 | 152 | |||||||||||||||
| Research and development |
1,631 | 1,433 | 1,211 | 3,064 | 2,290 | |||||||||||||||
| Sales and marketing |
500 | 428 | 382 | 928 | 694 | |||||||||||||||
| General and administrative |
1,097 | 964 | 875 | 2,061 | 1,613 | |||||||||||||||
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| Total stock-based compensation |
3,346 | 2,954 | 2,557 | 6,300 | 4,749 | |||||||||||||||
| Acquisition-related items: |
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| Amortization of intangible assets: |
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| Cost of net revenues |
— | — | 405 | — | 811 | |||||||||||||||
| Income tax effects of pre-tax adjustments |
(1,171 | ) | (1,034 | ) | — | (2,205 | ) | — | ||||||||||||
| Cash tax difference (1) |
5,137 | 5,817 | — | 10,954 | — | |||||||||||||||
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| Total of non-GAAP adjustments |
7,312 | 7,737 | 2,962 | 15,049 | 5,560 | |||||||||||||||
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| Non-GAAP net income |
$ | 15,068 | $ | 19,592 | $ | 6,054 | $ | 34,660 | $ | 10,410 | ||||||||||
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| Weighted average shares (basic) |
86,046 | 85,408 | 71,972 | 85,712 | 71,621 | |||||||||||||||
| Adjustment for dilutive shares |
3,244 | 3,913 | 5,907 | 3,584 | 5,344 | |||||||||||||||
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| Weighted average shares (diluted) |
89,290 | 89,321 | 77,879 | 89,296 | 76,965 | |||||||||||||||
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| GAAP net income per share (basic) |
$ | 0.09 | $ | 0.14 | $ | 0.04 | $ | 0.23 | $ | 0.07 | ||||||||||
| Non-GAAP adjustments detailed above |
0.08 | 0.08 | 0.04 | 0.16 | 0.07 | |||||||||||||||
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| Non-GAAP net income per share (diluted) (2) |
$ | 0.17 | $ | 0.22 | $ | 0.08 | $ | 0.39 | $ | 0.14 | ||||||||||
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| (1) | The Company’s non-GAAP net income per share is calculated using the cash tax rate of 2% and 5% for the three and six month periods ended June 30, 2011, respectively. The estimated cash tax rate is the estimated tax payable on the Company’s tax returns as a percentage of estimated annual non-GAAP pre-tax net income. The Company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances, the utilization of research and development tax credits, and the utilization of loss carryforwards which currently have an overall effect of reducing taxes payable. The Company believes that the cash tax rate provides a more transparent view of the Company’s operating results. The Company’s effective tax rate used for the purposes of calculating GAAP net income for the three and six month periods ended June 30, 2011 was approximately 36% and 35%, respectively. |
| (2) | During 2011, the Company changed its methodology for calculating non-GAAP net income per share by using the GAAP share count in the calculation of non-GAAP net income per share, and has reflected the effects of such change for all periods presented in 2011. |